Electronic lending and borrowing system

ABSTRACT

A common forum for borrowing and lending includes a plurality of remote devices associated with respective potential counterparts, a communications network for permitting communication between the remote devices, and a central server computer. Each user enters preferences and data pertaining to what he or she would like to lend or borrow and under what conditions. The central server computer then uses the preferences of lending and borrowing data from each user to identify possible counterparts that might be mutually acceptable based on the preference information. Once a match occurs, the potential counterparts can negotiate through the central server to negotiate some or all terms. After the negotiation is complete, the forum will reveal the counterpart details to both the parties of contract for settlement.

RELATED APPLICATIONS

This application claims priority from co-pending U.S. application Ser.No. 09/929,939, filed Aug. 15, 2001, the full disclosure of which ishereby incorporated by reference herein.

BACKGROUND OF THE INVENTION

1. Field of the Invention

This invention relates to an apparatus and method for matching apotential lender with a potential borrower. More specifically, thepresent invention involves enabling a potential money lender andpotential borrower to provide specific loan terms, the range ofacceptable loan terms, and a listing of negotiable loan terms.

2. Description of Related Art

Currently, the Depositors (lenders) and the borrowers of money mainlytransact through recognized financial institutions, most often Banks, orother financial institutions. These Banks are regulated by therespective Central Banks of the country which prescribe rules andregulations to these Banks to protect the interest of the Depositors.Yet the depositors run the risk on these Banks and their ultimateborrowers of these banks, as the depositors are not privy to theinformation for the end use of their money. In many countries thedepositors are unsecured creditors of these Banks and FinancialInstitutions. This structure creates centralization of the riskmanagement. Any failure in the risk management measures of thecentralized system exposes the whole economy and the depositor orinvestor to greater risk. Though there are rules and regulations togovern the interest of the Depositor, however they don't have controlover the end user of their monies. Even the depositors' insurance islimited to a certain fixed amount per depositor by insurance companies.

The Banks earn a spread over the interest paid to the depositor to coverthe following:

-   -   1. Reserves maintained with the Central bank which yields less        than market rate or no return.    -   2. Priority sector lending at a subsidized rate as prescribed by        the Central bank, which yields a lesser rate of return.    -   3. Operational costs of running the banks.    -   4. Premium for the risk.    -   5. Profit for the bank.    -   6. Other borrowing risks.

SUMMARY OF THE PRESENT INVENTION

One embodiment of the present invention provides a lending and borrowingfunction involving a specific method for matching prospective borrowerswith prospective lenders to initiate and complete a loan process. Themethod accepts data from the borrower (borrower data) via a computernetwork from one or more prospective borrowers. The borrower dataincludes, value of the loan, the loan term, rate of interest, the typeof collateral to be used in the loan, the loan terms and theirrespective range of acceptable values, and what loan terms arenegotiable by each prospective borrower. The method also accepts datafrom a lender (lender data) via a computer network from one or moreprospective lenders. The lender data includes, the type of collateral tobe used in the loan, the loan terms and their respective range ofacceptable values, and what loan terms are negotiable by the prospectivelenders.

After having received the borrower and lender data, the method involvescomparing the lender data to the borrower data to determine where and ifa data match occurs. The lender data matches the borrower data where thelender data has the same value as said lender data or is within therange of acceptable value of the lender data loan terms. The matchingfunction works to identify a prospective borrower for the prospectivelender. The method also matches borrower data to the lender data thathas the same value as the borrower data, or is within the range ofacceptable value of the borrower data loan terms. Here the matchingfunction works to identify a prospective lender for the prospectiveborrower. The method also stores the borrower and lender data received.

Included with the method is the step of transmitting counterpart loandata to each method user whose respective data results in a usercounterpart match. The method can also suspend the matching analysis ofthe loan data pertaining to a user upon request by the user.

The method facilitates multiple simultaneous communication between eachprospective borrower with one or more of the prospective lenders whoselender data matches with the borrower data of the prospective borrower.The method further facilitates the prospective borrower to negotiate theterms of the borrowing with multiple lenders simultaneously. The methodfacilitates the borrower to finalize the deal with one or more lender.Likewise, the method facilitates multiple simultaneous negotiationbetween each prospective lender with one or more of the prospectiveborrower whose borrowing data matches with the lender data of theprospective lender. The method further facilitates the prospectivelender to negotiate the terms of the lending with multiple borrowerssimultaneously. The method facilitates the lender to finalize the dealwith one or more borrower. The communication includes loan applicationnegotiation, and completion of the loan application process.

After completion of the loan negotiation process, the method alsocomprises the step of transferring loan funds from the prospectivelender to the prospective borrower through the escrow account of themethod. The method also evaluates the collateral and accepts collateralin the form of pledge, lien, or mortgage from the prospective borrowerthrough the escrow account managed by the method. The method can escrowthe collateral and return the loan collateral to the prospectiveborrower upon return of the loan along with the accruals at theexpiration of the loan. Alternatively, the method envisions forwardingthe collateral to the prospective lender in the event of a loan default.

The method monitors the collateral value for the duration of the loan atperiodic intervals, if the collateral value decreases below a specifiedamount, the method includes informing both counterparts and alsorequesting the borrower to add to the collateral account so that it isat or above the collateral specified amount. Further, the method willinitiate action to liquidate the collateral and pay proceeds to thelender if the borrower does not replenish finds to the collateralaccount after being requested to do so.

Also during the life of the loan, the method is capable of receivinginterest payments from the borrower and transferring the payment amount,or something equal in value, to the lender.

Should a foreclosure be required, the method is capable of foreclosingon the loan upon the request of one or more counterparts, and matchingthe remaining counterpart to a new counterpart to the loan. Thecounterpart requesting the foreclosure pays the penalty and charges ofthe other counterpart switching over to a new counterpart on new lendingor borrowing terms.

The method tracks the performance of every member on various parametersincluding: fulfillment of the contractual obligation like return of theitems lent or borrowed, amount of collateral, and rollover of the loanwith increase or decrease in loan.

The Electronic Lending System will provide the following advantages:

-   -   1. Managing of risk is distributed among the whole economy    -   2. The traditional banking industry will gain by transaction        processing without any involvement of credit risk.    -   3. The Borrower gets a return to the extent of the risk appetite        by choosing the type of collateral.    -   4. The Lender gets a better rate for the type of collateral        offered.    -   5. Reduces the cost of operations.    -   6. The traditional banking industry can participate in this        process the following way:        -   6.1. The borrower to pledge the shares, debts, or units to            bank.        -   6.2. The banks to issue bank guarantee.        -   6.3. The borrower to give the bank guarantees to the lender            as collateral for the loan.

Various other additional advantages and features of novelty, whichcharacterize the invention, are further pointed out in the claims thatfollow. However, for a better understanding of the invention and itsadvantages, reference should be made to the accompanying drawings anddescriptive matter which illustrate and describe preferred embodimentsof the invention.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1 provides a diagram of one configuration of the Lending andBorrowing Forum according to the present invention.

FIGS. 2, 3, 4 and 5 provide a flowchart of the operation of the Lendingand Borrowing Forum according to the present invention.

DETAILED DESCRIPTION

The Lending and Borrowing Forum according to the present invention willnow be described with reference to the accompanying drawings.

With reference to FIG. 1, one possible configuration of the Lending andBorrowing Forum 100 (the system) according to the present inventionincludes a central server computer 111 (central server), remote devices101 and 102, and remote servers 106 and 107. The system contemplates aplurality of remote devices whereby a large number of users havesimultaneous access to the system; however, for description purposes,two remote devices 101 and 102 and optional remote devices 103 and 104are shown in FIG. 1. The users typically comprise potential borrowersand potential lenders, who are accessing the forum in search of amatched borrower or lender according to specific loan requests providedto the forum by each user. For clarity, a counterpart refers to theentity that is on the other side of the loan, for example, thecounterpart to a lender would be the borrower, and vice-versa.

The system also includes a plurality of remote servers where by a largenumber of banks and depositories are connected to the system. Thelenders access the bank remote server 106 for a transfer of funds to themethods escrow bank account, similarly, the borrowers access thedepositories remote server 107 for the marking of pledge, liens, ormortgages, of the method on account for the lender.

While it is preferred that the central server 11 be the centralprocessing unit of a computer, it will be obvious to those skilled inthe art that a device or system like the one described herein having acentral server 11 that is capable of receiving data via a network, andprocessing that data, will be included in the scope of this invention.The preferred remote devices (101-104) are personal computers orspecifically produced input output stations capable of communicatingwith a central server via a network. However, any device that allows auser to communicate and receive data remote from the central server 11can be considered as an obvious remote device with respect to thepresent invention. The system as referred to and described hereincomprises the central server 11 as connected to the remote devices(101-104) via a communications network 1. The system also describesperipheral hardware such as data processors and data storage devices, asare well known in the art. Further, the system encompasses software thatis used to manipulate the central server. The central server 11 isconnected to the remote devices 101 and 102 through a communicationnetwork 1. The communication network could be a public domain network ofinterconnected servers, such as the Internet, a local area network, awide area network, or a private network using different type of devicescapable of interacting with the central server 11. Communication betweenthe remote devices (101-104) and the central server 11 is not limited tocurrent networking means, but can include future wireless mediums of anyfrequency in the electromagnetic spectrum, such as, infrared, light, orultra-violet light.

The communication between the between the user devices and the centralserver 11 involves primarily data transfer, either digital data orotherwise, concerning specific parameters of the prospective loan. As iswell known in the art, the data can be keyed into the remote device bythe user in data fields that appear on the remote device's displayscreen. The data fields are generated by software that resides on thecentral server 11 and are transmitted to the remote device via theemployed network. However, any apparatus that enables the user toprovide prospective loan information in a recognizable format to thecentral server 11 can be utilized in this invention.

FIGS. 2, 3 and 4 provide the flow charts, which illustrate the overalloperation of the Lending and Borrowing Forum according to the presentinvention shown in FIG. 1. The functions of the central server 11 asdescribed below may be performed using a configuration of hardwarecomponents, software components, or both. The system is capable ofprocessing transactions involving many types of instruments or tender,e.g., lending and borrowing of money, exchange of securities of varioustypes, and bank guarantees.

Additionally, the system is capable of handling multiple types of loanscenarios such as consumer loans for the purchase of a home, vehicle, orother item where the consumer requires a loan for the purchase. Thesystem also is capable of transacting loans for real estate, andcommercial loans. Different types of loans are envisioned as well, thatis traditional loans where the borrower makes monthly paymentsconsisting of principal, interest, and other fees such as insurance,alternatively the payments could be bimonthly, quarterly, semi-annually,annually, or at the termination of the loan. Also, the payments couldconsist of interest only with a balloon payment of principal at theexpiration of the loan.

For purposes of illustration, the operation of the system in a singlemarket will be described below. The steps of operation are as follows.

Process Description

200—The users register with the system using their respective remotedevices. Every user is generally either a potential borrower or alending institution. The registration process includes the userproviding information such as contact information (phone number, streetaddress, electronic mail address) and bank account details. Also uponregistration, the user can provide evidence for future secure use, suchas username, password, and a digital signature. The user information isstored by the system. Because the server is to be active at all times,users can register at any time. The method can also verify with the bankor the public debt office where the member possesses the account(s) andreports in their application and then allows the member to transactbusiness.

201—After registering, the user can enter preferences with respect tomaximum and minimum collateral required or available as well as the typeof collateral required or available. The type of collateral underconsideration could be capital, securities, a bank guarantee, realproperty, or personal property. If securities are chosen as collateral,the option is available to choose what industry sector the securitiesinvolve, as well as the type of securities (i.e. preferred shares). Inaddition to the amount of collateral required or available, thecollateral margin can be specified as well. Upon registration, thesystem provides the user necessary documentation that is required by thelaws of the specific jurisdiction where the user is located.

202—After submitting information regarding loan collateral, the user,either immediately or some time later, can enter the user's lendingoffer or the borrowing request. This is referred to as the first set ofparameters. One of the many advantages of this invention is theflexibility the user enjoys in prescribing the first set of parameters.For example, not only can the user define the details of the first setof parameters, but can also indicate which, if any, of the parametersare negotiable, and which are not.

The first set of parameters can include the lending period (the lengthof the loan), the interest rate, loan amount, what is being loaned, whatconstitutes loan default, the minimum or maximum number of counterparts,payment terms, and default penalties. Whether the user is a potentialborrower or lender, the user can also specify the range in which thefirst set of parameters could vary—that is if the user is a potentialborrower, and inputs an interest rate of 8% with a 0.5% variance, thepotential borrower is indicating he might accept a loan of 7.5% to 8.5%.The system can accommodate loans of capital, equities, or even debt. Thecapital must be defined by the currency being used, such as dollars,pounds, Eurodollars, or whatever currency is to be loaned. The equitiescan be common shares of stock from public or private companies, orpreferred shares, this is another option available to prospectivelenders and borrowers. The payment terms include when the loan paymentsare due, i.e. monthly, bimonthly, quarterly, etc, the grace period forlate payment, and the amount of each payment.

Information making up the first set of parameters is received by thecentral server 11 from the respective remote devices. This informationis preferably stored by the central server 11 into a database located ona storage means such as magnetic storage media in digital form. However,the storage means is not limited to magnetic media, but can includecurrently known or storage means obvious to one skilled in the art.Similarly, the data can be stored outside of a database and in a formother than digital.

203—Connected to or integral with the central server 11, is a dataprocessor that compares each loan offer with each borrower request (orvice-versa) in order to obtain a match. While the preferred dataprocessor function is performed by the central processing unit of acomputer as directed by computer software, any device or method capableof comparing multiple sets of data is covered by this invention. A matchbetween a loan offer and a borrower request occurs if each of the firstset of parameters of the loan offer is equal to, or falls within thegiven range, of the first set of parameters of the respective borrowerrequest. This is termed a user counterpart match, since the counterpartto a prospective lender is a prospective borrower and vice-versa.Further, the loan data entered by the matched borrower and lender isreferred to as counterpart loan data.

The matching criteria of the present invention is that thenon-negotiable values of the first set of parameters contained in thecounterpart offer (either a borrower request or loan offer) be equal to,or within the variable range, the non-negotiable values of the first setof parameters in the borrower request or loan offer to which thecounterpart offer is being compared to.

One of the many advantages of this invention is that the users have theoption of choosing from a number of alternative forms of matching thelender data to the borrower data. For example, alternative matchingfunctions can include an auction and reverse auction model, anegotiation model, a catalogue aggregation model, and a buyeraggregation model.

The auction and reverse auction model involves the user engagingmultiple loan counterparts simultaneously, where the counterparts bid onthe loan offer or the borrower request. Here the term counterpart refersto the party on the other side of the loan transaction. That is, thecounterpart for the user who is making the loan offer would be a usermaking the borrower request. An example of the auction and reverseauction model in action would be if a user submitted a borrower requestwhich specified auction matching, then multiple users offering loanswould submit their loans to the prospective borrower in an attempt tooutbid each other. The bidding process would then take on an upwarddynamic pricing action. Similarly, a user offering a loan on the subjectsystem could specify the auction matching, and multiple prospectiveborrowers could engage in the bidding process. This process can occurreal time, that is with all users being in communication with thecentral server at the same time, or can occur over a more protractedperiod of time, where the bidders are in communication with the centralserver at separate times.

In the negotiation model, the counterparts indicate that all terms arenegotiable and negotiate the terms via the system. Similar to thenegotiation model is the catalogue aggregation model where some of theprospective lenders or borrowers could post a willingness to lend orborrow, where the postings are valid for a long duration. The advantageof this is that it enables the specific user the ability to evaluatemultiple loan offers or borrower requests before entering into thenegotiation phase.

Opposite to the catalog aggregation model is the buyer aggregation modelwhere groups of like users (users who are all prospective lenders or areall prospective borrowers) come together to form a virtual large lenderor borrower. This volume aggregation could enable the aggregate group toobtain a volume discount based on the size of the group.

204—When a match between a specific loan offer and borrower requestoccurs, the central server 11 will internally store the match data inelectronic or magnetic form. The system and transmit the matched loanoffer to the matched borrower's device for viewing and analysis.Likewise, the central server 11 will transmit the matched borrowerrequest to the specific matched lender's remote device for viewing andanalysis. The loan offer and borrower request data is configured so thatthe respective displays are bifurcated into a first section thatdisplays the non-negotiable parameters, and a second section thatdisplays the negotiable parameters.

205—Having received the matched counterpart's data, which can comprisemore than one offer or request, and having had a chance to review thatdata, the user can select from the list of matched offers or requests.The selection process entails the user utilizing his or her remotedevice (101-104), either by a keyboard, or some peripheral accessory,such as a mouse. While this is the current preferred method of selectingfrom the potential list of offers or requests, all methods obvious toone skilled in the art are considered a part of this invention.

The method also allows a potential borrower to select from the initialmatch list of lenders, and to interact with some or all of the lendersin order to negotiate the terms of the loan. The users also have theoption of gathering past loan history of the potential counterpart, suchas the potential borrowers credit history.

Each prospective borrower or lender that is selected by the user isnotified of the selection by the system. The system can be modified toperform the selection process by one skilled in the art without undueexperimentation. The selected counterpart receiving notification ofselection has the option of responding via the system to the user toconfirm the selection or opting out at that time.

206—Once the borrower and the lender confirm the selection, eithercounterpart has the option of freezing the selection information so thatit is not displayed to other users.

207—After selection, and if desired, the counterparts can negotiatefurther to arrive at final loan terms. The central server 11 provides anoption for a direct communication link between the counterparts throughthe system, such as a chat session. Also provided via the central server11 is the communication option of messaging, such as real timeelectronic messaging, or electronic mail.

One of the many advantages of the negotiating aspect of the invention isthat potential counterparts have the option to provide loan offers orborrower requests that indicate a match may be possible if some aspectsof the offer or request were negotiable. Thus, if given the opportunityto negotiate some aspects of the offer or request, a particular user canultimately locate (by virtue of a system match) more potentialcounterparts than if no opportunity to negotiate were given. Increasingthe number of potential counterparts optimizes the loan matchingfunction for every user.

208—Once all of the parameters, negotiable and non-negotiable, areagreeable to both counterparts, a confirmation is communicated to eachcounterpart through the central server 11.

209—After the confirmation is transmitted by the central server 11, thesystem flags the particular lending and borrowing negotiation asconcluded. At this point the counterparts have two options, they cansettle the lending and borrowing transactions through the assistance ofthe system, or move offline and settle outside the system.

210—If the counterparts opt for the settlement of the lending andborrowing transaction through the forum, the lender transfers the loanamount from the lender into a system managed escrow account for futureaccess by the borrower. Although for illustration the transfer ofcapital has been described, if securities are being lent, securitieswould be transferred to the common account of the system preferably in afashion that is customary in the industry.

211—The collateral is then received by the system from the borrower, andthe method evaluates that the collateral is in the amount and type aspurported by the prospective borrower. If the collateral is in the formof a pledge on securities or bank guarantees, it could be verified withthe depositories, banks, public debt offices or the concern authorities.

212—Once the collateral as agreed between the lender and the borrowerhas been evaluated and its existence and amount verified, the lendingcapital is transferred from the escrow account that is managed by thesystem to the borrower.

213—Should the negotiation by the potential counterparts beunsuccessful, then on receipt of this information, the central server 11would release the freeze as described in step 206.

214—If the negotiation by the potential counterparts is unsuccessful theusers have a choice to re-enter the terms and/or modify the preferencesfor possible future matching within the system to other potentialcounterparts.

215—Modify the preferences and follow the steps from 200.

218—If the system is unable to locate a match for the user, either realtime or in the time specified by the user, the system will notify theuser that no match was found meeting his or her stated parameters.

219—Cognizant that no matches were available, the user nevertheless hasa choice to save his or her previously input first set of parameters forfuture matching.

220—If the user chooses to save the first set of parameters with thesystem, the central server saves that data for future matching based onsubsequently entered first set of parameter data input by prospectiveborrowers or lenders.

221—If the user chooses not to save the data, the data is stored by thecentral server 11 for archiving purposes and for market analysis, butnot for matching.

222-223 are similar to steps 213-215.

300—In order to reduce the risk of defaults, the central server monitorsthe value of the collateral provided by the borrower. If the borrowerhas pledged shares or securities, the system would monitor the value ofthese shares by interfacing with market price data. FIG. 3 describesthis process. In case of other type of collateral those will be valuedon their market value (or face value if the market value is notavailable) or as instructed by the lender.

301—Here the system provides updates regarding the collateral value tothe user counterparts.

302—After monitoring the real time collateral value, the system comparesthat value against the collateral value requirements as previouslydictated by the lender and agreed to by the borrower.

303—If the collateral value is determined to be lower than thecollateral value requirement, the central server 11, depending on thefall in real time collateral value and the preferences of the lender:(1) informs the borrower about the drop with a request that the borrowerprovide additional collateral; (2) warns the borrower that if there isno response within a specified time frame, the already submittedcollateral would be liquidated to the lender; or (3) liquidates thecollateral and forward the proceeds plus interest to the lender and theexcess to the borrower.

304—As determined in 302, the lender is also notified about the fall incollateral value.

305—As specified in 303, the borrower is requested to recapitalize thecollateral value until the collateral value equals the collateralrequirements.

307—If the borrower fails to recapitalize the collateral shortfall, thelender is so notified, and asked if the previously submitted collateralis to be liquidated.

308—If the Lender confirms liquidation in 307, the system wouldliquidate the collateral assets. The liquidation could be automaticthrough an electronic broker connected to a securities exchange, orcould be manually performed by traditional forms of asset liquidation.The capital return from the asset liquidation is provided to the lender,liquidated assets that exceed the collateral margin shortfall aretransferred to the borrower.

400—Once the agreed lending period has expired, the central serverfacilitates the return of the items lent to the lender and the return ofthe collateral to the borrower. The system also enables the users theoption of requesting that they be informed of the pending assettransfers a prescribed amount of time prior to the expiration of thecontract.

401—The time periods of all loans in the system are monitored on a dailybasis by the system. The central server 11 can perform this function, orso can ancillary hardware and software components as is well known inthe art.

402—The central server 11 determines if the lending period is close toexpiration.

403—The users are informed prior to the expiration of the lending periodas defined in the parameters.

404—Here the system asks the users if they wish to engage in asubsequent loan transaction (rollover). If the users wish to engage in arollover transaction, the system provides the option of a rollover onthe same terms as the initial loan transaction, or alternatively theusers can develop new loan terms.

406—Here the counterparts inform the system of their intent to negotiatethe loan.

407—The method provides opportunity for the counterparts to re-negotiatesome or all of the loan. As noted above, the users can choose tocommunicate directly with each other offline outside of the system, orthe users can choose to provide queries and responses through the systemvia remote devices and the system receives and transmits the queries andresponses to the respective counterparts. It will be appreciated thatone skilled in the art can readily create a system capable of performingthe above noted tasks without undue experimentation.

408—Here the system performs the loan rollover on the existing terms,with any interest accrual being added to the loan capital amount.

409—If the counterparts do not desire to engage in a loan rollover, thesystem will initiate the loan closure process.

410—The system receives from the borrower the loaned capital includingaccrued interest. If what is being lent is shares, the borrower shallreturn any accruals of corporate action, like bonuses or dividends,which occurred during the lending period. The transfer from the borrowerto the system can be by negotiable instrument, electronic transfer, orany other method representing a transfer of finds. Modifications obviousto one skilled in the art are considered a part of this invention.

411—Once the funds are received from the borrower the system transfersthem to the lender.

412—After funds equaling the loan amount are received by the system fromthe borrower, the system returns the collateral to the borrower.

413—If the borrower fails to provide loan payments, the collateral canbe liquidated at the request of the lender.

414—Proceeds from the liquidated collateral are transferred to thelender.

Steps 501 through 514 describe how a potential borrower can obtain abank guarantee from a bank utilizing the system disclosed herein. Inobtaining a bank guarantee it is envisioned that the potential borrowerwill offer collateral in exchange for the guarantee. The collateral caninclude: (1) securities including shares; (2) debt instruments; or (3) abank guarantee. If a borrower can first obtain a bank guarantee, theborrower can possibly obtain a lower interest rate from a lendinginstitution.

501—The system assists borrowers to obtain bank guarantees byidentifying banks that are willing to participate in the system byproviding bank guarantees.

502—Each bank, by communicating with the central server 11, wouldprovide preferences with respect to the maximum and minimum collateralrequired (with respective margins), charges, and the type of collateralrequired to issue a bank guarantee. For example, the type of collateralcould be shares or debt instruments. In case shares or debt instrumentsare chosen as collateral, a preferred industry segment of the shares isalso an option available for the bank to consider and choose.

503—Each prospective borrower then can login and can enter a request fora bank guarantee. The prospective borrower can specify the time periodand the amount for which the bank guarantee is required as well as thetype of the bank (Foreign, Nationalized, Scheduled, Cooperative Banksand others) from which the user requires the bank guarantee.

504—The central server 11 attempts to match the borrowers' requests withthe Bank's preferences.

505—If the matching is successful, the central server 11 displays on theremote device the matched requests to the borrower and informs the Bank.

506—As between the counterpart users above described, the systemprovides for further communication, where the communication includesnegotiation, between the Bank and the prospective borrower regardingspecific terms of the bank guarantee.

507—If the negotiation fails, the data contained in the borrower requestis maintained in the system for further matching.

508—On successful negotiation of all terms, the Bank confirms the matchby transmitting a confirmation to the central server 11.

509—Once the Bank confirms the selection, the central server computerwould freeze the information such that it is not displayed to the otherBanks.

510—The collateral is received from the borrower and placed into anescrow account. Here the system evaluates that the collateral is in theamount and type as purported by the prospective borrower. The collateralcould be in the form of a pledge, mortgage, or lien that could beverified with the depositories, banks, public debt offices, or theconcern authorities.

511—Once the type and amount of the collateral as promised by theborrower has been verified and has been received by the system, the Bankwould then provide the bank guarantee to the borrower and inform thesystem. The method would facilitate the borrower to offer this bankguarantee as a collateral for any loan transaction that occurs withinthe system described herein.

512—If there is no bank interested in providing bank guarantees, theprospective borrower can modify the preferences and follow the stepsfrom 500.

513—If the prospective borrower chooses to save the data concerning therequest for bank guarantee, the central server computer would save thedetails and would use it for future request.

514—If the user chooses not to save the data, the data is stored by thecentral server computer for archiving purposes and for market analysisbut would not use it for matching.

600—If the conditions precedent for a loan foreclosure have occurred,the system can provide notice of such events to both counterparts to theloan so that the counterparts can assess if a foreclosure is desired.

601—Either counterpart now has the option to place a request offoreclosure on the other counterpart. The request can be facilitatedthrough the system.

602—After receiving confirmation from the counterpart, the partyrequesting foreclosure may negotiate loan terms with a new potentialcounterpart for the remaining period of the loan. Where the negotiableterms of the loan are the loan amount, the interest rate, andcollateral.

603—Here the counterparts to the original loan agreement negotiate thepenalties with regard to the foreclosure.

604—The party requesting foreclosure negotiates with the new counterpartfor the remaining terms of the loan period, loan amount, interest rate,and other related loan terms.

605—Upon a successful negotiation between the new counterparts, thesystem is requested to initiate the foreclosure settlement between theoriginal counterparts.

606—Here the central system determines if the foreclosure was the faultof the original borrower or original lender.

607—If the original lender was the cause of the foreclosure, theoriginal lender to pay penalties to the original borrower.

608—The new lender provides finding to replace intended loan amount.

609—Once the new lender provides finding, the system will allocate thecollateral in the name of the new lender.

610—After collateral allocation in the new lender's favor, the systemwill return the remainder of the original loan amount to the originallender.

611—If the new counterpart is a new borrower, here the new borrowersubmits collateral to the system.

612—The original borrower pays foreclosure penalties to the originallender.

613—Original borrower returns original loan item to the system.

614—After receiving the loan proceeds from the original borrower, thesystem can transfer those proceeds to the new borrower.

615—If the original counterpart who is not requesting foreclosure doesnot want to foreclose the loan, that message is communicated by thesystem to the counterpart requesting foreclosure.

700—Here the method provides a tracking service to member banks thathave issued guarantees for the members on the basis of collateral.

701—The value of the collateral submitted by the borrower to the bank inconsideration of a bank guarantee can be tracked by the system.

702—Here, “the mark to market” value of the collateral is determined.The “mark to market” is calculated by determining the current marketvalue of the collateral versus the amount of the bank guarantee that hasbeen utilized by the borrower for loans.

703—The system compares the collateral value as indicated in the marketreport with the required collateral amount to determine if the currentcollateral value is less than the required collateral amount. Here therequired collateral amount is the amount of the bank guarantee.

704—The system notifies the borrower and the bank if a collateralshortfall (i.e. the current collateral value is less than the requiredvalue) is present. The system also reports to the lender how much of thebank guarantee has been “utilized”, the bank guarantee is utilized whenit is used as collateral for a subsequent loan by the borrower. Theamount utilized is generally some percentage of the amount of the bankguarantee, it is typically not equal to 100% of the bank guarantee dueto lending costs associated with obtaining a loan.

705—The system requests that the borrower add to the collateral amountto overcome the collateral shortfall.

706—The system monitors the collateral value to determine if theborrower has provided additional funding to the collateral account suchthat the collateral shortfall is eliminated.

707—When additional funding is added to the collateral account, thesystem notifies the bank and the borrower accordingly.

708—If no funds are added to the collateral account, the systemcalculates how much of the bank guarantee has been utilized by theborrower in procuring subsequent loans within the system.

709—The system determines if the bank guarantee has been fully utilized,that is if the borrower has procured a loan against the entire amount ofthe bank guarantee.

710—If the bank guarantee has been fully utilized, then the systemliquidates the collateral upon instruction by the bank.

711—If the bank guarantee has not been fully utilized, but insteadutilized to some amount, the system then calculates the amount of thebank guarantee that can be utilized (the eligible bank guarantee). Theamount of the bank guarantee that can be utilized will be a portion ofthe current collateral value minus the amount of the bank guarantee thathas already been utilized.

712—The system determines if the eligible bank guarantee is greater orless than the amount of the bank guarantee that has been utilized.

713—The system informs the borrower that he needs to submit additionalcollateral.

714—The system monitors the collateral account to determine ifadditional collateral has been added or not.

715—If the borrower submits the collateral as required, the systemupdates its records and informs the bank and borrower as to thecollateral account status.

716—If the borrower fails to submit additional funds to the collateralaccount, the system begins to liquidate the collateral.

717—If the eligible bank guarantee value is less than the utilized bankguarantee, the system recalculates the eligible bank guarantee based onthe utilized bank guarantee and the collateral value. Afterrecalculating the new eligible bank guarantee amount, the system informsthe borrower and the bank of the new value.

718—The system tracks how the borrower has utilized the bank guaranteewith lenders within the system.

719—The system provides periodic reports to the bank and the borrower ofhow the borrower has utilized the bank guarantee with lenders within thesystem.

800—As noted above, the system provides a method for receiving loanpayments from the borrower and forwarding those payments to the lender.In addition to receiving and forwarding these payments, the system willmonitor all payments made, if the payments are made timely, how muchinterest and principal has been paid. The system can also notify theusers if payments have not been made timely and take steps to correct anon-payment. These steps are described in more detail below.

801—The system monitors if a loan payment is due, or if all requiredloan payments have been made to the system by the borrower. As describedbelow it is considered that the loan payment be an installment loan thatis comprised of a conglomeration of interest, principal, and other feessuch as insurance and possibly home owners' association fees. However,the loan payment can alternatively be a real estate or commercial loan.Further, the loan payment requirements might require just periodicinterest payments with the balance of the loan payable in the form of aballoon payment at the termination of the loan.

802—If all loan payments have been made, the system calculates the totalamount paid by the borrower, including how much principal, interest,insurance, and all other fees are due.

803—Here the system provides statements to the borrower and lenderreflecting the payments made and how they were distributed, i.e. howmuch of the loan payment was allocated to pay for principal, interest,or other associated fees.

804—The system will determine the next loan payment due date.

805—Based on the current date, and the date of the next loan payment,the system will have a notice sent to the borrower that a loan paymentis due. The notice should be sent with sufficient time to reach theborrower and give the borrower time to make payment on the loan. Theamount of time provided before the payment is due, can be decided by theborrower and the lender under the payment terms.

807—If it is determined that a loan payment is due, the system willcheck the escrow account to determine if a loan payment has been madefor the subject loan period.

808—If a loan payment has been timely made, the system will thentransfer that loan payment from the escrow account to the lender.

809—After the system confirms that the loan payment has been made, thesystem will provide a confirmation of that payment to the borrower andlender.

810—If the system determines that a loan payment is due where no loanpayment has been made, the system will send out a first notice to theborrower and to the lender indicating that a loan payment is due and hasnot been paid.

811—At some time after the first notice has been made, the system willquery the escrow account to determine if the overdue loan payment hasbeen made. The amount of time given between sending out the notice andquerying the account is generally about 10 days, but can vary dependingon the users and upon agreement between the lender and borrower.

812—If the payment in response to the notice is made to the escrowaccount, the system will then transfer that amount to the lender.

813—Upon transfer the system calculates the late payment penalty that isto be accrued to the borrower.

814—The next payment due is then adjusted to include the amount ofpenalty for late payment.

815—Statements reflecting the penalty amount and loan amount areprepared and forwarded to the lender and borrower.

816—If payment has not been made upon the second query, a second noticeis sent to the borrower and to the lender indicating that the paymenthas not been made.

817—At some time period after sending the second query, the system willask the lender if the collateral is to be liquidated, or if the borrowercan delay the late payment until the next payment is due.

819—If the lender agrees to accept payment upon the next due date, thesystem will calculate the next payment amount which includes bothpayments and a late payment penalty with interest.

820—After calculating the new next payment amount, the system willforward the payment report to the lender and borrower.

821—If the lender wishes to liquidate, the system will initiateproceedings to liquidate the collateral and will forward the proceedsfrom the liquidation to the lender.

The present invention described herein, therefore, is well adapted tocarry out the objects and attain the ends and advantages mentioned, aswell as others inherent therein. While a presently preferred embodimentof the invention has been given for purposes of disclosure, numerouschanges in the details of procedures for accomplishing the desiredresults. For example, remote devices could include devices such aspersonal digital assistants, pagers, and cellular phones, or any otherdevice receiving or transmitting data via a wireless medium. These andother similar modifications will readily suggest themselves to thoseskilled in the art, and are intended to be encompassed within the spiritof the present invention disclosed herein and the scope of the appendedclaims.

1.-36. (canceled)
 37. The method of assisting potential borrowers toobtain bank guarantees comprising the steps of: receiving bank data froma user that is a bank, via a computer network, where said bank datacomprises, maximum collateral required, minimum collateral required,charges, and the required type of collateral; receiving borrower datafrom a user that is a borrower via a computer network, where saidborrower data comprises, the time period, the guarantee amount, and thetype of bank said borrower wishes to obtain a bank guarantee from;comparing said bank data to said borrower data and matching said bankdata to said borrower data when said bank data contains the same valuesas said borrower data; informing each said bank whose bank data matcheswith one or more entries of borrower data thereby identifying aprospective counterpart; informing each said borrower whose borrowerdata matches with one or more entries of bank data thereby identifying aprospective counterpart; and facilitating communication betweenrespective counterparts.
 38. The method of claim 37, wherein saidcommunication between respective counterparts comprises negotiationbetween said counterparts in order for said borrower to obtain a bankguarantee.
 39. The method of claim 37, further comprising receivingcollateral information from a prospective borrower and verifying thevalue of said collateral.
 40. The method of claim 37 further comprisingthe step of receiving collateral funds from said borrower and placingsaid collateral funds into an escrow account. 41.-46. (canceled)
 47. Themethod of claim 37 further comprising monitoring said collateral value.48. The method of claim 37 further comprising monitoring the utilizationof said bank guarantee.
 49. The method of claim 37 further comprisingcomparing said collateral value to said bank guarantee to determine theamount of the bank guarantee eligible for lending purposes. 50.-53.(canceled)